HMDA Deadline Quickly Approaching
Regulation C mandates that a covered institution will prepare and submit to their regulator a year-end LAR that is clean of validity errors by March 1st following the calendar year of the loan data. Due to March 1st falling on a Saturday this year the deadline is extended to Monday, March 3rd.
Fed Unveils Long-Awaited HOEPA Rules
National Mortgage News
The Federal Reserve Board is proposing a "robust set" of rules to clean up subprime lending practices and to address unfair and deceptive practices associated with servicing, mortgage broker fees, and appraisals. On subprime and higher-priced alternative-A mortgages, the Home Ownership and Equity Protection Act proposal would create an ability-to-repay standard, require lenders to verify income and assets to curb stated-income lending, mandate escrow accounts for at least 12 months, and require prepayment penalties to expire 60 days before the first monthly increase in payments. Under pressure from Congress, the Fed was expected to address those subprime practices. However, the Fed decided that it needed to go further to provide a robust and "more comprehensive set of protections" that apply to all mortgages, said Randall Kroszner, a Fed governor.
The proposal requires brokers to disclose up front the dollar amount of their fees, including yield-spread premiums, in a written agreement with the borrower. "Creditor payments to a mortgage broker could not exceed the total compensation amount stated in the written agreement," according to the proposal, which is being issued for a 90-day comment period. Servicers could be sued under the Truth in Lending Act for failing to post mortgage payments properly and pyramiding late fees. Lenders and brokers also would be liable for coercing appraisers. "We want consumers to make decisions about home mortgage options confidently, with assurance that unscrupulous home mortgage practices will not be tolerated," Fed Chairman Ben Bernanke said.
Fannie Eyes Appraisals in Light of Price Declines
National Mortgage News
Fannie Mae has already identified 1,800 ZIP codes where house prices have declined, and it expects appraisals to accurately reflect those market realities, according to Fannie vice president Hope Evans. "Sadly, we are seeing a lot of these appraisals with no mention whatsoever about the declining market," Ms. Evans told a Mortgage Bankers Association quality assurance conference. Fannie's automated underwriting system flags appraisals in those ZIP codes. "It is very important that you react to this message. Fannie is looking to see if there is additional field work in the file," she said.
The Fannie vice president stressed that lenders need to have a "heightened awareness" that house prices declines have become more "pervasive" over the past year and are no longer just in pockets or isolated areas. She also said Fannie Mae is "working very actively on producing" an exclusionary list that identifies fraudsters. Freddie Mac currently has an exclusionary list that it shares with industry partners.
NAACP Files HMDA Suit Against 14 Lenders
The National Association for the Advancement of Colored People (NAACP) announced on July 11 that it had filed a lawsuit against 14 lenders for racial discrimination. The suit alleges that Ameriquest, Wells Fargo, Fremont, Option One, WMC Mortgage, Long Beach Mortgage, CitiGroup, BNC Mortgage, Accredited Home Lenders, Encore, First Franklin, HSBC & Washington Mutual engaged in "systematic, institutionalized racism in making home mortgage loans."
The organization also has suggested that this may be the tip of the iceberg for legal action. This issue has been a main concern of mortgage trade associations against including HMDA rate spread pricing data without relation to credit scores, LTV or other factors necessary to evaluate fair lending practices.
HUD Announces New Fair Lending Review Division
HUD - Shantae Goodloe
The U.S. Department of Housing and Urban Development's Office of Fair Housing and Equal Opportunity (FHEO) recently announced that it is creating a new Fair Lending Division that will review mortgage lending practices throughout the nation. HUD has hired a senior-level economist and has advertised to hire five fair lending specialists to enhance its capacity to investigate allegations of mortgage lending discrimination.
"We have launched a record number of investigations this year and have recently announced several major fair lending settlements," said Kim Kendrick, HUD's Assistant Secretary for Fair Housing and Equal Opportunity. "But in today's lending environment, where consumers sometimes become victims of discriminatory practices, we have to do more to educate and protect potential homeowners and enforce the law."
Agencies Release Proposed Revisions to Interagency Q&A Regarding CRA
The federal bank and thrift regulatory agencies have requested public comment on a series of new and revised interagency questions and answers pertaining to the Community Reinvestment Act (CRA). The Interagency Questions and Answers Regarding Community Reinvestment were first published in 1996 under the auspices of the Federal Financial Institutions Examination Council (FFIEC). They have been revised by the agencies periodically since then to help financial institutions and the public better understand CRA regulations.
Bachus Bill Would Create Originator Registry
Rep. Spencer Bachus, R-Ala., has introduced a subprime lending reform bill that would establish a national registry for all mortgage originators -- including loan officers at federally insured banks and their wholly owned subsidiaries.